“You
can save hundreds or thousands of dollars by prioritizing your debts,”
he added. “You can also get the benefit of a higher credit score by
being smart about what you pay first.”
Ulzheimer recommends these ground rules for those who are serious about reducing their debt in 2012:

REMEMBER THE BASICS
Make
sure you make your minimum payments to ALL of your creditors… on time…
each month. If you can pay more, you should. But skipping a payment or
paying late is a big no-no.

RETAILER CARDS FIRST
Choose
your retailer credit cards (i.e. Macy’s, Gap, Nordstrom, etc.) as the
ones you pay off first. Be aggressive. On average, the interest rate
on these cards is about 10-12-percentage points higher than general use
credit cards like Visa, MasterCard, and Discover.
“You should be
able to knock them out faster because the balances on these cards are
generally lower than general use cards,” said Ulzheimer.
“And by
paying off retail cards, you’ll also improve your credit score because
you’ve lowered the number of cards with a balance and the infamous “debt
utilization” percentage – both of which are very important in your FICO
scores.”

SOCK LESS AWAY…FOR NOW
Ulzheimer
said you may also want to stop contributing to your 401K and IRA until
you’ve paid off your credit card debt. The amount you are earning in
“gain” is probably not as much as you are paying in interest.
“That means you’re losing money each month you have credit card debt.” Said Ulzheimer.

INSTALLMENT DEBT VS. CREDIT CARD DEBT
Don’t
put installment debt in front of credit card debt. Rates on cars,
houses, student loans are much lower than those on plastic. And you are
probably getting tax advantages on your mortgage and student loans.

KNOW WHEN TO SETTLE
If your debt is in default or being handled by a collection agency, then you need to offer what’s referred to as a “settlement.”

“I never advise this unless you’re dealing with collection agencies,” said Ulzheimer.
“They
normally acquire the debt for pennies on the dollar so your former
$1,000 debt isn’t really what you owe the collector, but that’s what
they’re going to try to collect,” he explained. “Start your offer at
10% of what they say you owe and work with them until a satisfactory
settlement has been reached.